Medicare for All, the Bernie Sanders Version

Since I’ve spent so much time discussing the extensive details of Elizabeth Warren’s Medicare for All plans (let’s call it WarrenM4A), I think this week it’s time I talked about Bernie Sanders’ M4A plans (SandersM4A). These are the only two leading Democratic candidates who are advocating M4A.

Like I did for my analysis of Elizabeth Warren’s plans, I will rely only on what Bernie Sanders has committed to on his official campaign website. He’s made it easy for me because there is very little on there. Here are the direct quotes of all relevant information from his website (here and here):

“Create a Medicare for All, single-payer, national health insurance program to provide everyone in America with comprehensive health care coverage, free at the point of service.”

“No networks, no premiums, no deductibles, no copays, no surprise bills.”

“Medicare coverage will be expanded and improved to include: include dental, hearing, vision, and home- and community-based long-term care, in-patient and out-patient services, mental health and substance abuse treatment, reproductive and maternity care, prescription drugs, and more.”

“[Make] sure that no one in America pays over $200 a year for the medicine they need by capping what Americans pay for prescription drugs under Medicare for All.”

“Allow Medicare to negotiate with the big drug companies to lower prescription drug prices with the Medicare Drug Price Negotiation Act.”

“Allow patients, pharmacists, and wholesalers to buy low-cost prescription drugs from Canada and other industrialized countries with the Affordable and Safe Prescription Drug Importation Act.”

“Cut prescription drug prices in half, with the Prescription Drug Price Relief Act, by pegging prices to the median drug price in five major countries: Canada, the United Kingdom, France, Germany, and Japan.”

“Eliminate all of the $81 billion in past-due medical debt held by 79 million Americans —one in every six Americans.”

“The federal government will negotiate and pay off past-due medical bills in collections that have been reported to credit agencies.”

“Reform bankruptcy laws to use the existing bankruptcy court system to provide relief for those with burdensome medical debt.”

“End abusive and harassing debt collection practices.”

That’s it. I didn’t quote all his specifics about how he will get rid of medical debt and reform bankruptcy laws, but that is less relevant to a discussion about the future function of the healthcare system itself under his SandersM4A.

My brief summary of those quotes: he’s going to cover everyone with Medicare; he will enhance Medicare’s benefits to include dental, hearing, vision, long-term care, etc.; there will be no out-of-pocket expenses for services; he will use a variety to means to lower prescription prices significantly plus cap out-of-pocket spending on prescriptions to $200/person/year (I assume he is not meaning $200/person/medication/year); and he will negotiate and pay off all existing medical debts.

We see here the same simplicity that WarrenM4A offers, for both patients and providers. That is, after all, one of the main draws of M4A in general–it’s probably the simplest way to cover everyone.

Let’s talk briefly about how SandersM4A will deal with drug prices. Medicare will be allowed to negotiate, which it will be able to do very successfully when it covers all 300-something million of us. We will also be allowed to buy drugs from other countries for those times when, despite Medicare’s negotiations, other countries’ prices are still lower than ours. And then, confusingly, he also says he’s going to peg drug prices to the median prices of some other countries. This doesn’t sound like negotiation, so I’m not sure how it fits with his promise to get Medicare to negotiate drug prices.

Regardless, he is leveraging known successful methods of lowering prices–increase supply, and increase (and also take advantage of!) your bargaining power. This is very similar to what WarrenM4A proposes, which you can review here.

Unfortunately, that’s about as much as I can say about SandersM4A. There’s no discussion about how he would transition, nor how he would set prices, which is probably politically prudent (although frustrating). He’s getting rid of all cost sharing, which seriously impedes the opportunity to stimulate value-improving innovations over time, as I’ve written about before. But, who knows, maybe he would implement many of the other pricing features I’ve described to achieve an optimal single-payer system and thereby prevent the unfortunate demise I have predicted for WarrenM4A.

I’ll repeat myself one final time: M4A can be implemented without much thought about or understanding of the realities of market mechanisms, or it can be implemented in a way that leverages those market mechanisms to also fix healthcare for the long term. So far, I’m not seeing any evidence of the latter from these candidates.

Reading Elizabeth Warren’s Healthcare Plan, Part 7

Part 1: Quotes directly from Elizabeth Warren’s official website about her healthcare plan, from which I am drawing all of my information for subsequent posts

Part 2: Reviewing her plans for dealing with pharmaceutical prices

Part 3: How she will “improve the ACA” to get her transition to M4A started

Part 4: All the other things she’ll do before starting the transition to M4A, including some Medicaid changes, increasing access for rural and underserved patients, making antitrust enforcement stricter, and a variety of other incremental changes

Combine all the details from parts 2, 3, and 4, and you have the most likely scenario of how the healthcare system will end up with a Warren administration!

Part 5: How she will transition to M4A, which is mainly by lowering Medicare eligibility to age 50 and then offering a Medicare “public option” for people ages 0-49 that pretty much anyone can opt into

Part 6: A description of what she would have M4A look like based on the details she’s shared on her website

This is the final installment of my series on Elizabeth Warren’s healthcare plans. Let’s talk a little bit about how the healthcare system would do with a M4A as she has described it.

The first thing to note is that it will be simple, especially after all cost-sharing requirements are phased out. Everyone is covered, nearly all providers in the country will be in network, and there will be no confusing coverage issues or cost sharing issues. I love simple, especially because complexity in our current system is such an insidious and ubiquitous cause of waste.

Not only will it be simple for patients, but also it will be simple for providers. They only deal with one insurer, one price for each service, one set of coverage rules, one form for prior authorizations, etc. This will certainly contribute to lower administrative costs (a huge problem), but it will be in a zillion ways that are hard to predict until we see it happen.

People commonly voice to me this concern about a lack of cost sharing: “Won’t this mean people will run to the doctor every time they have a cough, so they’re going to drive up total healthcare spending a bunch because of all these unnecessary services?” Yes, people will have a lower threshold for receiving care. The Rand Health Insurance Experiment showed us that long ago. The thing is, people don’t know in advance which services that they’re seeking out are necessary and which are unnecessary, so getting rid of cost sharing will also get more people care that they actually need. There’s a theoretical benefit here that disease will be caught earlier when it’s cheaper to manage, although I haven’t seen evidence that bears that out. But the real issue with eliminating cost sharing is explained here.

Let’s move on to total healthcare spending to see what this single-payer system will do about that. Experts disagree on whether/how much this plan would decrease total healthcare spending, but remember that there’s a current level of spending and then there’s the long-term trend of spending. My guess is that the level of spending would go down a little bit due to the greater simplicity, even with more people covered and more generous benefits. But what about the trend of spending?

We will still have an aging and progressively more obese and sicker population. We will still have continued medical innovations that allow us to do more things for more people. Can you see that, even if we lower our current level of spending by implementing M4A, our spending trend is still going to grow faster than our GDP? How would Elizabeth Warren combat that?

The short answer is by administratively lowering prices–globally if necessary, but mostly via provider-specific price lowering according to “the progress of provider adjustments to new, lower rates.”

I love simplicity, but I equally despise administrative pricing, especially in this fashion that smacks of Soviet price controls. She seems to be proposing to “reward” a provider that does a good job getting costs down by giving them less money. What incentive does that create? This is going to get gamed like crazy.

And when providers–who have no direct control over their patients getting older and fatter and sicker–are required to deliver more care to these people (thus pushing up total healthcare spending), she will punish them by imposing global rate cuts. Or, she will try. That will be the true test of the power of the hospital and physician lobbies.

What will happen next? Some new reform will come along to solve the unsolved spending crisis, and we’ll be back to trying to overhaul our system.

If our country chooses M4A, so be it. I, as an individual, have very little control over that. But if we’re going to do it, maybe I can have some small influence on getting us to do it properly. Like I’ve said before, everything depends on how you implement a single-payer system to determine the sustainability of it. And I’ve already written about what needs to happen for it to be successful. That’s the purpose of my Building a Healthcare System from Scratch series, and I’ve also shown how the principles from that series would apply to an optimal single-payer system.

So, to conclude this series, I will say that Elizabeth Warren’s vision for M4A has some things going for it from a design standpoint, and her plan to get us there is very clever, but her legacy will be doomed to fiscal failure probably within a couple decades if she doesn’t also set up the mechanisms that are required to solve the spending trend problem.